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Social Security Strategies: Offset Provisions

By Larry Swedroe

Updated on: September 29, 2011 / 10:38 AM EDT / MoneyWatch

Q: My wife and I are approaching retirement. I have the bigger income and will probably draw about $1,700 in Social Security benefits at age 62, or about $2,200 at age 66. My wife works as a teacher for school systems that paid into Social Security for about 11 years. However, she has also worked the past 26 years in a school system that didn't pay into the system. Under the offset provision (or windfall elimination provision), it seems to indicate that they'll take any Social Security she could earn either as her own benefit or as a spouse down by 2/3 of her pension. She will be earning about $3,000 a month in a pension starting in about three years. My question is: Would she not be still eligible for a 50 percent spousal benefit since she had qualified for as a Social Security earner through other work that paid into the system?
If so, then she could get between $560 and $1,100 (depending on when I claim my benefits) per month, unless she's blocked by the rule. She has been getting statements from Social Security saying that it'll pay her about $250 per month when she reached 62 or about $300 per month at 66 without regard to the spousal benefit issue. What do you think?
A: The following is a response from my Right Financial Plan co-author Tiya Lim, who wrote the Social Security section of our book.

Thanks for reading the blog! Did you get a chance to read the posts on the WEP and GPO:

To answer your question, your wife will still receive a small benefit off her own work record. The WEP reduces her Social Security benefit but won't eliminate it. So at 62, she can still receive her estimated $250 a month, but that number will be reduced. The Social Security office can provide you with those reduced amounts.

As for her spousal benefit, that's offset by the GPO. Since her pension is about $3,000, the offset is 2/3 of her pension amount, or $2,000. That means any spouse or survivor benefit (if eligible) will be offset by $2,000.

She's unlikely to collect a spousal benefit from you. If she were to claim at 66, she would be eligible for 50 percent of your full benefit, or $1,100. The $2,000 offset is greater, so she wouldn't collect any spouse benefit from you. She will, however, continue to collect her own worker benefit.

If she survives you, the offset works the same way. If you claimed at 66, received $2,200 and pre-decease her, she would be eligible for the full $2,200 benefit, but it would be offset by $2,000. Her survivor benefit would be $200.

Photo courtesy of DonkeyHotey on Flickr.
If you have a question you would like to have answered, please submit it using this blog's contact form. Please note that Larry will try to get a response back to you, even if your question doesn't appear on the blog.
For further reading on Social Security, see the following posts:

File and Suspend
Double Dipping
Former Spouses
How Are My Benefits Calculated?
Single Filers
Understanding the Spousal Benefit
Government Pensions: Offset Provision and Windfall Elimination Provision
The Issues with Taking Benefits Early and Investing Them

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